December 2, 2008 / 1:44 PM / 10 years ago

UPDATE 1-Friedman raises Legg Mason price target

Dec 2 (Reuters) - Friedman Billings Ramsey raised its price target on Legg Mason Inc’s (LM.N) stock citing reduction in risk premium due to amendments to the company’s debt covenants.

Baltimore-based Legg said on Monday it had renewed for one year a total return swap with a bank that would support $355 million of structured investment vehicle (SIV) securities.

The company also said it had revised its existing debt covenants.

“By amending its debt covenants and extending the total return swap, Legg has reduced the risk of having to realize cash losses on the sale of its SIV holdings,” analyst Matt Snowling said in a note to clients.

This helps the company manage available capital, given the uncertain market value of such securities at present, the analyst added.

Snowling raised his price target on the stock to $12 from $11.

However, the brokerage reiterated its “underperform” rating and said Legg Mason now has $1.67 billion of collateral posted against its support agreements, as the fair value of the holdings suggests sizeable cash losses will be realized over time. Shares of the company were up 5 percent in trading before the bell. They closed at $14.92 Monday on the New York Stock Exchange. (Reporting by Amiteshwar Singh in Bangalore; Editing by Gopakumar Warrier)

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